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Casting Light on the Future of Agriculture

Agriculture is in the midst of very real change, with a newfound enthusiasm on the part of consumers for quality produce grown in a sustainable fashion. In this quest to source food locally and take care in how it’s grown, it’s not surprising that growing indoors and in greenhouses is becoming more and more popular. With the right technology, a grower can carefully monitor and control moisture, temperature, and light in a way that can maximize yields and improve quality.

And when it comes to the right technology, Swedish company Heliospectra (HLSPY) is on the cutting edge. Its LED lighting systems can give growers a chance to take control of the conditions they grow in that are unique and useful. Equities.com got a chance to talk with Heliospectra CEO Staffan Hillberg about his company and its plans for the future.

EQ: What it is that makes your lights special? Why are Heliospectra's lights superior to the competition and why does that really matter to indoor growers?

Staffan Hillberg: To start, I think one huge difference is that the company is founded by plant biologists. We're always focusing on the plants as the most important aspect, and then we engineer the lights around that. You see a lot of products in the market, especially coming from China, that are inferior products because they’re made by engineers who have no clue whatsoever about plants.

Another major difference is that we're a system-focused company. We’re not just selling customers a light, we’re selling a complete system. Our lights have adjustable spectrums, and we're adding software and sensors to the system as well. That means the customer can buy one part of the system and then add on accessories and software as they want to grow their installation and get more sophisticated. This allows us to upsale, add services and support and move to a recurring revenue model.

We're aiming for large industrial growers. They want to produce plants all year round at the same quality, and they can’t have their system go down so we have a very high standard of quality. We quality check each individual light, and we have third party certification houses that test for European and US standards. We publish a video where the European testing authority is spraying our lights with water from all types of angles, and it's a great demonstration of the quality of our technology.

EQ: Because of a shifting regulatory environment in the United States, an opportunity has been presented by the cannabis market. What are the advantages and benefits to growing cannabis indoors and why are your lighting systems ideal for that?

Staffan Hillberg: Cannabis is a “short day” plant. It knows when the days are getting shorter, when the fall and winter are coming and that’s when the plant will start to flower and spread its seeds. By growing indoors, we can trick the plant and repeat a number of seasons during one calendar year rather than having just the one normal season. By using Heliospectra’s ability to adjust the spectrum and simulate dawn and dusk, we can further reduce the flowering cycle by sometimes two weeks, so you're going from a 10-week flowering cycle to an 8-week. That means you might be able to get in another crop over the course of a year, which is a huge advantage.

There’s also the importance of controlling your growing environment. Traditionally, cannabis growers have used high-pressure sodium lights, which have a lot of heat in the beam. That means that you're heating the growing environment. Then you have to buy AC equipment and run it throughout the day, which becomes very expensive.

By using our lights, you reduce the electricity necessary to run the lights because you don’t have heat in the beam, and you’re reducing your cooling cost as well. That gives you a return of investment in about 12 to 18 months, which is very quick for these growers. Then, obviously, you create a much better environment with less humidity, less temperature, and less control issues to deal with, so that allows you to have a better product as well.

We can also influence the physical characteristics of the plant and for instance make the stem thicker, fuller leaves, shorter or longer plant as well as the chemicals in the plant which is of high interest when you are trying to optimize CBD and/or THC in a plant.

EQ: Your systems are useful for a wide variety of plants, though. What other crops are common among your customers?

Staffan Hillberg: The great thing with our technology is that we're plant agnostic; we can work with any type of plant. We have customers like big international ag-tech companies, we have universities and other players in the research field. We’re working with NASA and we have a European Union contract with the German Space Agency where they're looking to grow in space, just like what they're doing in “The Martian.” We’re also putting up a growing facility in the Antarctic at the end of this year. The Antarctic is closed off for a 180 days a year, so it's as close as you can get to growing in space.

Obviously, in that type of environment you're focused on growing edible plants. This is what we find in the greenhouse market, where we did a lot of our original work before we went into cannabis. We’re working with the largest grower of fresh herbs in Europe right now and improving the lighting in their greenhouses and new vertical farming facilities.

What is happening with the greenhouse industry, it's changing. People are starting to grow these types of edible plants in controlled environments indoors without the sun because they want to have year-round production of the same level of quality. Plus, they’re also doing vertical farming, which means they're growing three-dimensionally by utilizing the height of the growing premise so they can actually get a much higher yield. We’re also doing ornamentals, berries and fruits, so all types of plants from edibles to ornamental plants, and of course medical plants not limited to Cannabis. There are some very high margin medical plants besides Cannabis, like those in the Asian markets.

EQ: How has the shift in the market towards organic and all-natural produce affected your business?

Staffan Hillberg: Obviously, people are looking for organically and naturally grown food. That means they're also looking for food that is grown closer to the consumer, because that means you're reducing transportation costs. You're reducing the emittance of carbon dioxide, which is good for the environment.

They’re also looking to reduce the amount of water used in growing, because if you're growing outdoors there's a huge amount of evaporation. By growing in these controlled environments and using our technology, you can reduce water consumption. That also opens up growing in the Middle East and other dry areas of the world. We’re going to have these same changes in California and Texas and other places in the United States.

Asia is another interesting area. If China were self-sufficient with regard to agricultural products, it would have to feed 20% of the world’s population with only 10% of the world’s arable land and 6% of global water resources.

It’s all about using resources in a better way and controlling what type of soil or nutrients you're using. You’re not dependent on something that you can’t trust. These people are creating their own nutrients based on natural products, and all this means you need to grow in a controlled environment where you reuse remaining water and control all the inputs. We enable this type of environment.

EQ: What should investors be in the lookout from Heliospectra over the next year? Are there any major milestones coming up?

Staffan Hillberg: We just launched our product at the end of 2014, so 2015 for us was a year where we got some real traction in the market. We’ve had very high growth. Now, 2016 is a year when we're getting into larger customers. All the work that we have done in 2015 with trials with customers, all of this is going to come to fruition. This is a very important year for us and it actually means dramatically scaling our scales. This is what we're focusing on this year.

EQ: Do you have any additional closing comments?

Staffan Hillberg: Even if we're focusing on sales, our company does not stop innovating. Innovating is part of our DNA, so continuing to develop our products, improve our products, and do that together with our customers so we always have them involved in our product development, that is still key to the company.

Part of this is we also protect our technology. We have a very strong patent portfolio and patent strategy that we're working on. It’s essential to protect our intangible assets, so we’re working with patents as well as design protections and trademarks. We secure IP rights early on and we’re careful about drafting non-disclosure agreements.

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